Moody’s threatens Germany downgrade. According to "Die Welt" there are 4 faults that doom the Euro. No heroic attempts will save the Euro. Rather will doom Germany, too. Germany is giving loans and guarantees assuming a Trillion Euro in guarantees for doomed countries. Several times its yearly budget of just over 300 Billion Euro. And this is before the unlimited rescue packages for the bigger countries like Italy and Spain.
Mistake 1: All people are equal. Germany developed solar and wind energy, while Greece, Spain and Portugal have much twice as much wind and sun. The latters simply lack the inventiveness and energy of the Germans.
Mistake 2: Lower interest (in Southern Europe) decrease cost of government debt and create growth. Changing from Drachma, Escudo, Lira to Euro decreased interest rates from 10% to 2%. Instead of using the gains to pay back government debt, these countries went on a spending spree. High government expenses please voters. Greek government salaries doubled in 10 years. Note that Germany, Sweden manage austerity measures (see Mistake 1). Spending and growth were based on borrowing, while the economy was destroyed by cheaper and more efficient German production.
Mistake 3: one same interest 2% level levels differences Germany’s support payments caused a boom in Spain. 2% interest loans with 3.5% inflation really invites overspending. Germany should have lower interest rates of 1% (and thus more growth and consumption. Southern countries should have had 6%-7%. interest rates.
Mistake 4: One currency leads to same wages. The lower quality of French cars was offset by lower prices due to currency devaluation of the Franc. Now Peugeot is closing factories because they cannot decrease their cost to compete against better German products. (source "Die Welt")
.Target 2 debt owed by the South to the North accumulated to about 1 Trillion Euro of unpaid (and unpayable) debt. The signs of doom were visible for a decade, but were swept under the rug until the problems became huge and unmanageable. The unavoidable doom of Greek, Spanish and other countries finances will be delayed by Germany taking unmanageable unlimited risk. Thus Germany might sink together with these countries. The iron-clad "no bailout clause" was simply violated, just as debt limits. So there is no reason to believe that any new agreement will be kept, in the long run.
The Euro was doomed from the start. The idea that a common currency can join Europe into a unity has proven to be flawed. It is destroying European countries and create serious irreparable hostilities between nations.
False dogma and political correctness cause suffering.
Germany is guaranteeing several years of its federal budget to other countries.
The federal government will spend 306.2 billion euros next year, equal to this year’s outlays. Germany’s budget is made up of federal, state and municipal accounts. The Finance Ministry and federal lawmakers fine-tune the budget each fall, scouring outlays for last-minute savings.Bloomberg
GERMANY, the Netherlands and Luxembourg received a shot across the bows last night when Moody’s put their top-notch AAA credit ratings on negative watch.
The move means that three of the Eurozone’s most stable economies could see their credit ratings downgraded within 18 months.
Moody’s said that all three countries are susceptible to the effects of two eventualities: a Greek exit from the Eurozone and the likelihood that the strongest single currency members might be called upon to provide more financial support for countries that have not yet received bailouts, namely Italy and Spain.
Only Finland, that resisted the unlimited guarantees to Greece remains stably AAA rated
Euro-area bonds fell today after Moody’s lowered the outlook to negative for the Aaa credit ratings of Germany, the Netherlands and Luxembourg. Moody’s cited “rising uncertainty” over Europe’s debt crisis. It left Finland as the only country in the 17-nation euro region with a stable outlook for its top ranking. 3
The largest defaults in recent memory were 64 billion euros by Russia in 1998 and 66 billion euros by Argentina in 2001. (Amounts converted from national currencies).
While these defaults roiled global financial markets, they pale in comparison to the Eurozone debt crisis. Tiny, teetering Greece has a national debt of more than 360 billion euros. Portugal and Spain owe 170 billion euros and 740 billion euros, respectively. Then comes Italy at a staggering 2.3 trillion euros.
Given the huge struggle to prevent a Greek default, it’s clear that the so-called European Financial Stability Facility is ill-equipped to stop a Spanish default and would be virtually helpless in the face of an Italian default.
Even at the height of the pre-2008 economic boom, Eurozone countries were borrowing to pay for extravagant social entitlements. [...]
Then, rather than cutting Greece loose after it was revealed that the country had gained membership by fraudulently hiding its true financial position, the Eurozone poured 250 billion euros into bailouts.
Human-Stupidity has written about the chaos of the doomed Euro
- The Euro destroys Europe. Euro breakup necessary to save Europe.
- Different cultures, differing inflation, same currency. The Euro aggresses cultural identities, thus creates animosity.
- Diversity of European Cultures dooms the Euro. Greeks need to work like Germans, Dutch to spend like Italians for the Euro to function.